Fiserv Takes $6.45B Charge as Margins Shrink: Rapid Earnings Reaction
Key Points
Adjusted earnings per share dropped to $1.75 from $2.04 while organic revenue stayed flat.
The Merchant Solutions segment, home to Clover, drove most of the decline in operating profit.
Management held its full-year outlook, which now depends on a stronger fourth quarter.
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Fiserv (NASDAQ: FISV) booked a $6.45 billion non-cash goodwill write-down, which turned third-quarter GAAP earnings into a loss of $11.17 per share. Shares rose about 10% in pre-market trading. Behind the charge, organic revenue was flat and adjusted earnings fell to $1.75 from $2.04, so profit is shrinking faster than revenue. The affirmed full-year guidance now needs a clear revenue turn in the fourth quarter.
Key Numbers
- Organic revenue: flat from a year ago.
- Merchant Solutions operating margin: 28.7%, versus 37.2%.
- Adjusted operating margin: 31.2%, versus 37%.
- Adjusted EPS: $1.75, versus $2.04.
What It Means
Costs are rising while sales stall. Adjusted operating income fell 17% while revenue barely moved, and most of that loss sits in Merchant Solutions, the card-acceptance and Clover business.
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Adjusted earnings leave out a lot. Fiserv has excluded nearly $500 million of One Fiserv transformation costs this year, covering technology modernization, consulting, and retention pay. Multi-year costs that recur each quarter are part of what the business really earns.
Guidance is the real test. Organic revenue is down 3% for the nine months, so the affirmed full-year range takes a clear fourth-quarter turn.
What to Watch Next
Watch whether fourth-quarter organic revenue turns clearly positive, as management expects. Also track whether the raised $1 billion Project Elevate savings target shows up in margins.
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Randy Coon has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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